Embrace the Kinross Way Forward

It took a long and arduous journey to get there, but Kinross Gold (NYSE: KGC  ) finally gets it.

After years of treating aggressive acquisitions and no-holds-barred volume growth as the company's dominant priorities, the embattled gold miner is developing a vastly different guiding ethos under newly instated CEO J. Paul Rollinson. With increasing emphasis upon disciplined cost reduction and cash flow generation, the company has outlined a program called "The Kinross Way Forward" to unlock "greater value at both our mines and projects." In unveiling the program, Rollinson speaks the magic words that investors have been waiting to hear from Kinross for years: "Our focus will be on quality, and not just quantity."

Words are fine and dandy, but Kinross is already backing up the encouraging rhetoric with tangible improvements on multiple fronts. The out-of-control escalation of mine development and construction costs that dealt Kinross shareholders such mortal wounds in recent years has already begun to reverse course under the company's new leadership. In its third-quarter-earnings report, Kinross revealed a $200 million reduction in estimated capex for 2012, from $2.2 billion to $2 billion. Those reductions correspond primarily to development capital, but include greater efficiencies with respect to sustaining capital as well.

Per-ounce costs are also on the mend, with a production costs of $677 per gold-equivalent ounce (GEO) representing a substantial 7% sequential improvement over the $725 cost recorded during former CEO Tye Burt's final quarter with the company. Kinross' adjusted earnings of $250.4 million -- or $0.22 per share -- exceeded analysts' expectations, and lifted the stock to within spitting distance of reclaiming a double-digit share price. Attributable production volume grew 6% to reach 0.67 million GEOs for the quarter, with particularly strong results from the company's Fort Knox, Cupol, and La Coipa mines. Impressively, the company remains on track to meet full-year guidance for at least 2.5 million GEOs with an average cost of sales near the $700-per-GEO mark.

Looking forward, I see powerful potential for Kinross Gold to make a new name for itself as this refreshing emphasis upon quality percolates through an impressive asset portfolio. Goldcorp (NYSE: GG  ) remains my hands-down choice as the superior investment vehicle among the major miners of gold, and readers can access my just-completed, premium research report outlining Goldcorp's unparalleled growth potential by clicking here.

Rivals Barrick Gold (NYSE: ABX  ) and Newmont Mining (NYSE: NEM  ) have seen their own shares battered as cost escalation, permitting woes, and other challenges have made their presence felt throughout the industry. I believe Barrick and Newmont could each receive a nice bump as gold prices breakout to a new all-time high, but among the three I believe Kinross shares offer the superior bargain.

Goldcorp is one of the leading players in the gold mining market. For the last several years, investors have been the beneficiaries of several successful acquisitions and strong organic growth. Goldcorp's low-cost production of one of the most sought-after metals in the world continues to make it an attractive choice for long-term investors. Click here for our detailed report to discover more about this mining specialist.


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  • Report this Comment On November 08, 2012, at 5:09 PM, vparanja wrote:

    India will continue to be at the the top as a consumer for the gold. India's appetite for the yellow metal is so strong that the price irrelevent. If the price rises, there is a slight decrease in demand but such loss in demand is always temporary. As the largest producer of Gold Barrick is the stock with the heighest potential. I buy this stock any time. So also you !

    V.V. Paranjape

  • Report this Comment On November 09, 2012, at 11:16 PM, skypilot2005 wrote:

    http://www.kinross.com/news-articles/2012/11072012-kinross-r...

    "Development at Dvoinoye continues to advance and the project remains on schedule to deliver first ore to the Kupol mill in the second half of 2013."

    Long and Strong KGC

    Sky

  • Report this Comment On November 09, 2012, at 11:19 PM, skypilot2005 wrote:

    KGC F. Y. I.:

    Paul Rollinson was appointed Chief Executive Officer on August 1, 2012. He joined Kinross as Executive Vice-President, New Investments, in September 2008. In September 2009, he was appointed Executive Vice-President, Corporate Development.

    Paul joined Kinross after a long career in investment banking, most recently as the Deputy Head of Investment Banking at Scotia Capital. During his time with Scotia, he was responsible for the mining, power/utilities, forestry and industrial sectors. He also served as Managing Director/Head of Americas for the mining group within Deutsche Bank AG, and before that, was a senior member of the mining team at BMO Nesbitt Burns. Paul has an Honours BSc in Geology from Laurentian University and an M. Eng. in Mining from McGill University.

    Brant E. Hinze was appointed President and Chief Operating Officer on August 9, 2012. Brant first joined Kinross as Executive Vice-President and Chief Operating Officer in October 2010.

    Mr. Hinze is an accomplished mining industry leader who was most recently Senior Vice-President, North American Operations, for Newmont Mining Corporation. In this role, he oversaw eight operating mines, regional exploration and development activities, and led Newmont's corporate social responsibility, information technology, supply chain, legal and human resources functions in the region.

    From 2002 to 2005, Mr. Hinze was General Manager of Newmont's Yanacocha Project in Peru, which at its peak was the largest producing gold mine in the world. Prior to Yanacocha, he managed other operations for the company in the United States, Bolivia and Indonesia. From 1985 to 1991, Mr. Hinze held technical and managerial positions at the McCoy-Cove and Lupin operations of Echo Bay Minerals, which Kinross acquired in 2003.

    Mr. Hinze has a Mining Engineering degree from the University of Idaho, and speaks Spanish.

    Director:

    Mr. Carrington was Vice-Chairman and a director of Barrick Gold from 1999 through 2004. Prior to that Mr. Carrington was Chief Operating Officer of Barrick from 1996 until February 2004. He has also occupied the functions of President and Executive Vice President, Operations of Barrick Gold in 1997 and 1995 respectively. Prior to that, Mr. Carrington occupied officerships in other mining companies, including Noranda Minerals Inc., Brunswick Mining and Smelting Inc. and Minnova Inc.

    Mr. Carrington holds a Bachelor of Applied Science (Mining Engineering) and a Master of Engineering (Mining). He is a member of the Association of Professional Engineers of Ontario

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